California Board Clarifies Drop Shipment Requirement

The California Board of Pharmacy has agreed on an approach for handling pedigree requirements for drop shipments.

In the drop shipment process, manufacturers ship drugs directly to pharmacies, while ownership of the drug is transferred to the wholesaler/distributor which handles the pharmacy invoicing.

The board has sought to clarify how drop shipments would comply with the pedigree law, which requires the electronic pedigree record to be passed with every transfer of ownership of the drug.

The board is setting forth an “alternative process” for drop shipments, with the addition of Section 1747.2 to Article 5.5 of Division 17 of Title 16 of the California Code of Regulations, entitled “Drop Shipments.”

The proposed text—unanimously accepted by the board—says that data elements pertaining to transfers of ownership to and from the wholesale distributor, including certifications of receipt and delivery, may be omitted from the pedigree, as the manufacturer conveys the pedigree directly to the pharmacy.

The board is accepting comments to the proposed text until October 28; it will hold a regulation hearing on the proposal October 29 in Garden Grove, CA, the board reported.

The approach will reduce potential confusion and compliance problems with the pedigree law, eliminate potential costs to businesses in implementing the new pedigree requirements, and avoid possible unnecessary delays in drug delivery to patients, according to a Notice of Proposed Action released this week.

“The goal of public protection would not be compromised in providing this alternative process since the delivery and receipt of dangerous drugs between the parties who actually possessed the drug would still be tracked and recorded on the pedigree, which would then be passed along with the drug to the authorized purchaser,” according to the board’s Notice of Proposed Action.

Passing on the pedigree with every transfer of ownership is a problem in drop shipping as the wholesaler often does not become aware of the transaction until after a shipment is received.

“This would make it problematic for the wholesaler to provide the pedigree or “pass” it as the time of transfer to the purchaser as currently required and to certify the truth and accuracy of the receipt and delivery of the drug when the wholesaler never actually physically received or delivered the dangerous drug,” according to the Notice.

As the Notice defines the process:

“The board’s proposal would specify that when a manufacture utilizes the “drop shipment” method of sale, as defined, for a dangerous drug, the manufacturer may omit data elements from the pedigree showing transfers of ownership to and from the wholesale distributor, including any certifications of receipt and delivery of the drug by the wholesaler. That pedigree would then be required to be conveyed directly from the manufacturer to the authorized purchaser prior to or contemporaneously with the delivery of the dangerous drug.

“The board’s proposal will allow wholesalers involved in drop shipment to omit their ownership information from the electronic pedigree. This ensures entities that never physically possess the dangerous drugs are not subject to reporting requirements of the pedigree; thereby, the electronic pedigree stands to be a true documentation of the possessors of the dangerous drugs.”